Consumerism | - Part 3

Retail Sales Rise More than Expected

The Commerce Department reported(.pdf) that U.S. retail sales rose for the first time in three months, up 0.3 percent in February after downwardly revised declines of 0.3 percent in December and 0.6 percent in January. Revisions to data for prior months totaled -0.4 percentage points, making the February improvement a bit less than what meets the eye.

Bad winter weather was once again cited as a key factor in this report and it is unlikely that there will be a clear picture of the underlying health of this component of consumer spending in the U.S. until late in the spring, after the expected bounce-back from the steepest retail sales decline in two years.

February Retail Sales

Gains were broad-based as nine of the 13 major categories saw higher sales. Excluding motor vehicles, sales rose 0.3 percent after dropping 0.3 percent in January and receipts were also 0.3 percent higher when excluding both autos and gasoline, a big improvement from the 0.5 percent decline for this group the month before.

February sales gains were paced by increased buying at sporting goods, hobby, book & music stores (+2.5%), health & personal care stores (+1.2%), and nonstore (online) retailers (+1.2%), all of the categories perhaps benefiting from the harsh winter weather (think boots, cold remedies, and shopping at home).

Sales declines included miscellaneous store retailers (-0.9%), general merchandise (-0.3%), and both electronics and grocery stores (-0.2%).

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Consumer Confidence Fades?

The two main gauges of the American mood – the Conference Board’s consumer confidence index and the Reuters/University of Michigan consumer sentiment index – have held up pretty well in recent months after tumbling last fall amid another government budget fight that led to a partial shutdown that lasted a few weeks.

You can see that fall dip in the chart below from this item at Gallup where things took a turn for the worse in the latest report released yesterday, their weekly economic confidence index falling to the lowest level since mid-December.

As shown in the lower panel, it was the sharp decline in the outlook for the future that dragged the overall index down as this sub-index dropped from -11 to -20 with some 57 percent of the respondents saying things are getting worse, not better.

As reported last week, Bloomberg’s consumer comfort index shows no such deterioration recently and, with the weather warming after a nasty winter, you’d think that, absent another crisis of some kind this spring, Americans’ outlook should brighten. We’ll see…

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Retail Sales Disappoint, Weather Blamed

The Commerce Department reported (.pdf) that, following a downwardly revised seasonally adjusted decline of 0.1 percent in December (originally reported as a gain of 0.2 percent), retail sales in the U.S. fell 0.4 percent in January, the largest drop in ten months and the first back-to-back decline in almost two years.

Inclement weather was blamed for keeping Americans away from auto showrooms as car sales slumped, but consumers weren’t shopping as much elsewhere either as sales for only four of the thirteen major categories rose.

January Retail Sales

Excluding the 2.1 percent drop for motor vehicles and parts, sales were flat last month after a gain of 0.3 percent the month prior and, excluding both autos and gasoline, sales fell 0.2 percent after a gain of 0.1 percent.

The news would have been even worse if not for rising fuel prices that pushed gasoline station sales 1.1 percent higher. Home improvement stores were one of the few other areas where receipts were higher, up 1.4 percent in January, as rising real estate prices over the last year or so have encouraged spending in this area.

After autos, declines were led by department stores where sales fell 1.5 percent and sporting goods stores where receipts were 1.4 percent lower. Elsewhere, sales saw modest, but broad-based declines averaging about one half percent.

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Confidence Remains (Relatively) High

Earlier today, the Conference Board reported that consumer confidence rose again this month, up from a downwardly revised 77.5 in December to 80.7 in January, as the current conditions index rose to the highest reading of the recovery, up 3.8 points to 79.1.

The expectations index rose just 1.8 points to 81.8, however, all of these readings remain well below the 90-to-110 range that is typical of non-recession periods as shown below. Note that Hurricane Katrina in late-2005 was the only occasion following the 2001 recession that confidence dipped below the 90 mark by any significant amount.

Also today, the Case-Shiller Home Price Index showed home prices continuing to rise, up almost 14 percent from a year ago for the biggest annual gain in almost eight years.

But, orders for durable goods disappointed, down 4.3 percent in December versus analysts’ estimates for a gain of 2 percent. Excluding the volatile transportation component orders fell 1.6 percent, and this will temper some of the enthusiasm surrounding fourth quarter growth that is set to be released on Thursday.

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